Share option move fails to quell opposition

Russell Hotten reports on business reaction to the Chancellor's surprise decision

The Chancellor's climbdown over share options has failed to stem concern about the impact on thousands of middle managers and lower-paid workers.

Although the changes were welcomed by the Confederation of British Industry's employers' group and at least one member of the Greenbury committee, businessmen, accountants and MPs vowed tofight for further changes.

Sir David Lees, a member of the Greenbury team that began the debacle, said Mr Clarke "had acted wisely" yesterday. The committee of leading industrialists has been severely embarrassed by the affair and Mr Lees would not be drawn on whether the Chancellor had gone far enough.

But Archie Norman, chief executive of supermarket group Asda and one of the most vociferous critics of last week's changes, said a campaign for further changes would continue. He called Mr Clarke's revision a "welcome but minimalist response", and questioned the Government's commitment to encouraging wider share ownership. Asda has 36,000 employees in share option schemes.

At a private meeting on Wednesday with Michael Jack, Financial Secretary to the Treasury, Mr Norman proposed a scheme that would protect low-earners from paying tax but penalise senior executives.

Mr Norman said yesterday that Asda would continue to campaign for a simple and equitable solution to the problem. Many other employers would join him, he said. He added that the decision to impose tax on all employees with options "appears to mark a watershed in the Government's attitude to wider share ownership and employee participation".

In a one sentence statement, Howard Davies, director general of the CBI, said Mr Clarke's move was "a sensible decision which removes the most widespread cause of complaint among businesses about the Chancellor's changes last week".

Tax experts warned the revision would continue to cause disquiet. David Tuch, a partner at KPMG Peat Marwick, the UK's biggest accountancy firm, said: "Surely it would have been better for him to agree to a consultation. Under the new regime there is still a problem on the timing of the tax change.

"Given the likelihood of further changes, individuals who are granted options on or after 17 July are left in the impossible position of not knowing what their tax liability will be."

GREENBURY DAYS

28.2.95 - John Major indicates support for curbing levels of executive pay.

17.7.95 - Report from the Greenbury Committee published. Key suggestion includes taxing profits on share options.

17.7.95 - Kenneth Clarke announces in "dawn raid" that share option windfalls will be subject to full income tax.

20.7.95 - Sir Richard says he has "made a mistake" and warns the chancellor that ordinary workers will lose out.

27.7.95 - Mr Clarke says he will reconsider the share options issue.